Why We’re Investing in… Evernym & The Sovrin FoundationOctober 2017
If you have spoken to me recently you will know myself and the Outlier team are really very excited to have announced at the beginning of the month becoming Evernym’s, and the Sovrin Foundation and it’s token’s, lead investor and strategic partner. As with every investment we wanted to find some time to provide the rationale to our decision which I have laid out below.
Fundamentally as Evernym’s CEO (Timothy Ruff) puts it: ‘The Internet was built without an identity layer, and a mechanism for establishing trust’. This has led to huge inefficiencies and major social concern as we are forced to trust companies who have consistently shown they are unable to secure the personal data they are obliged to collect when interacting with us. It’s a lose-lose situation at present and you could argue it is the single biggest problem for The Web as a whole. If ever there was a usecase for blockchain it is decentralised identity with the conceptual benefit of censorship resistance and self-sovereign ownership.
In fact back in 2015 myself and Aron highlighted ‘decentralised identity’ as a fundamental building block the blockchain community needed to put in place for anything meaningful to happen in an increasingly decentralised Web. To date, despite multiple attempts, nothing has gained meaningful traction with an approach that we believed fundamentally fixes the problem without too many compromising trade-offs.
Evernym’s technology and approach, including the introduction of the Sovrin Token to incentivise the identity ecosystem, we believe promises to finally solve the challenge in a scalable way. All trusted interactions, whether online or not, start with a series of verifiable claims around identity, and once in place allow for things like truly anonymous payments are possible. In fact the distinguishing factor between Sovrin and other identity solutions is they approach identity as a collection of claims and in fact believe the proper way to look at at the establishment of online trust as a form of ‘claims exchange’. Because of this we believe Sovrin can eclipse anything we have seen so far and go on to be a Top 10 crypto-currency in its own right.
When describing Sovrin’s capabilities we use the words ‘truly anonymous, zero knowledge proofs, pairwise pseudonymous decentralized identifiers (DIDs), self-sovereign identity, and ‘verifiable claims’, but what the hell does all that mean?
- Self-sovereign identity ultimately means rather than rely on third parties to guarantee our identity by storing personal data we give back control and ownership to the individual. It’s important, however, to highlight identity in an increasingly automated world will include ‘things’ (such as objects in The Internet of Things) including bots or digital agents, which will need a guardian-type relationship to a self-sovereign entity. Children, disabled persons and others will also need guardian relationships to someone who has self-sovereignty.
- Zero knowledge proofs are an innovation that means an ability to prove a claim (through clever math) without revealing any of the data that makes it so, such as proving you’re over 21 without revealing your birthday or even your age. This means you can make verifiable claims without burdening the relying party with having to secure your data. This is where Sovrin as a ‘claims exchange’ comes in, and that approach solves huge problems for IoT, allowing the use of biometric or location data to establish trust between people, organizations, and things.
- Pairwise Identifiers is one of the breakthrough innovations compared to every other identity solution we have seen. Bitcoin is not anonymous because whilst your ‘real world’ identity may be concealed, you repeatedly use the same identifier to transact, which allows others to triangulate or “correlate” you. Now you might say this is a good thing and it is not a simple subject to address. But the starting point of Sovrin’s team is to always assume you are transacting in a hostile environment when doing anything on a public blockchain. Today your state might be friendly but history has shown us we are always one step away if ever from something less benevolent.
These innovations mean Sovrin is the world’s first privacy focused blockchain protocol for identity and verifiable claims exchange, between people and things. Sovrin is identity for the internet done right.
So what does that mean in a practical sense? Well… if we now as individuals can fully own and control our identity and associated data we can choose to be totally anonymous or we can choose to reveal certain truths, without having to transfer the data that proves it to a third party.
- I can prove I have over $10,000 of Bitcoin in my wallet without revealing its total balance.
- I can prove that $10,000, or even a portion, came from legitimate sources that meet the KYC and AML requirements.
- This means I can transact and exist in the new web paradigm of crypto and still be accepted and part of the existing financial system.
Now you might think why would I want to do that!? Well today we (as the wider blockchain community) are creating parallel financial systems. But participating in crypto will increasingly exclude you from the traditional banking systems, as you lose a footprint. This means people who derive most of their wealth from say freelancing for Bitcoin (or gains from token holdings) will increasingly become financially excluded from being able to get loans or mortgages or the safety nets of state welfare and benefits, and this will be perhaps THE major hurdle for crypto to go mainstream.
And if, or perhaps when, we all shift over to this new financial system we will still need the ability enjoy a kind of anonymous cash and simultaneously allow for verifiable claims to be made on our incomes or transactions to access financial products and services that are compliant with various regulations. I see these two worlds becoming increasingly integrated and Sovrin being the link that makes it possible.
Furthermore, Evernym has chosen to open source much of its proprietary technology and IP and donate it to The Sovrin Foundation, which in turn donated the source code to the Hyperledger Foundation where it is now known as “Hyperledger Indy.” The Sovrin Foundation is an independent foundation staffed with some of the most respected people in the identity space such as Phil Windley, which serves as the world’s first foundation dedicated to an open source blockchain based protocol for identity.
This means everyone can get a Sovrin identity: individuals, organizations and things can own and control their identities in full.
Now what’s important to understand is that in order for this system of exchanging claims, which will be so fundamental to our entire social fabric, functions effectively and with proper levels of governance, The Sovrin Network is deliberately permissioned. That means the infrastructure for ensuring consensus on identity transactions is provided by carefully vetted and permissioned ‘stewards’, carefully distributed around the world, who independently own and operate their nodes on the network. These utilize the Sovrin Trust Framework to combine to form a system of checks and balances that earns trust through action rather than promises and limits the possibility of centralised processing power and stakeholder imbalance, ensuring the systems security can not be hijacked by any one small group.
Evernym has existed for several years and is already working with clients like The US Department of Homeland Security, R3, the country of Finland (through the MyData initiative), and a number of leading global financial institutions including the entire U.S. credit union industry. It has a fully up and running business development function staffed by senior professionals in both North America and Europe.
Furthermore, the code base of Sovrin is part of the Hyperledger project, which is governed by the Linux Foundation and backed by corporates such as IBM, Intel and SAP. It is also about to announce a series of incredibly impressive stewards joining the network. At Outlier many of our portfolio, including recently IOTA, have seen its power and begin exploring integrating it into their solutions.
Under the leadership of the charismatic Timothy Ruff these are a group of people who have been in the trenches of startup life with each other for many years. They are seasoned identity professionals with the buy in of their community as seen by the stellar cast of people involved in The Sovrin Foundation which has intentionally invited board members to represent expertise from across multiple industries and geographies, ensuring that special interests – whether commercial, governmental, or otherwise – do not unduly influence decisions.
These people are professionals, and equally credible with the corporate world as they are crypto and identity communities.
The Evernym and Sovrin teams collectively deeply appreciate the importance and value of considered crypto-economic design when thinking through how to realise the ‘identity & claims economy’ to create a system that is both sustainable and more equitable. They have shown this in seeking us at Outlier and not rushing to do an ICO but rather invest the time and resource to do things right. In doing so they, in collaboration with our partners at Imperial College, they are creating an economic framework using advanced behavioural economics and game theory to ensure network effect and order.